“Greece Credit Rating Raised….”

Greece Credit Rating Raised

S&P Global Ratings upgraded the country’s credit ratings for the first time in two years by raising it one level, helping the government’s plan to continue a bond-market comeback this year.  The country’s long-term foreign currency debt was upgraded to B with a positive outlook from B-, according to S&P.  Fitch Ratings had upgraded Greece to B- in August, while Moody’s Investors Services rates the country Caa2.  Each is below the junk threshold.    The new rankings remains five levels below investment grade.  Furthermore, S&P stated that, “Greece’s growth and fiscal outlooks have improved alongside a labour market recovery and amid a period of relative policy certainty.  The positive outlook on Greece reflects further upside rating potential from the policy and financing environment over the next year”.  Greek bonds have rallied since December as talks with euro-area and International Monetary Fund officials have progressed smoothly without the drama seen in previous bailout reviews.  The yield on benchmark 10 year bonds has fallen to 3.83 percent from more than 7 percent a year ago.

Germany

German manufacturers raised prices at one of the fastest paces on record at the start of 2018.  This shows confidence that Europe’s largest economy is in for another year of solid growth.  Job creation in the private sector which also includes services, gathered pace in January as orders and backlogs of work continued to grow.   Output expanded 2.2 percent in 2017, the most in six years and the Bundesbank, predicted momentum will be maintained this year. Despite the failure of Angela Merkel to form a government, the economy has proven resilient.  The headline composite Purchasing Manager’s Index slipped to 58.8 from 58.9 in December. Whilst a gauge for manufacturing fell to a three-month low, the measure for services reached a sever year high.

German Chancellor Angela Merkel

Over the weekend the chances for German Chancellor Angela Merkel to lead a fourth term received a boost when her prospective coalition partner, the Social Democratic Party, voted to formally enter negotiations on forming a government.  With this news the Euro climbed to $1.2261 on the prospect of an end to a near-four month political stalemate that has affected Europe’s biggest economy.

Euro – Area Economy

The Euro Area Economy opens this year with the best growth in almost 12 years, bringing with it signs of a pickup in inflation which has long been awaited.  The IHS Markit Purchasing Manager’s index increased from 58.1 in December to 58.6, at a level suggesting quarterly economic growth of close to 1 percent according to the report.   According to IHS Markit some of the latest surge in prices relates to higher costs for oil and raw materials, however there is a sense that underlying inflation may finally start to take off.  There were also signs of inflation in the PMI for Germany where factories increased prices up at a near-record pace.  The headline index shows that Germany maintained its momentum at the start of 2018 and France also recorded a similar upbeat performance.

ECB Monetary Policy Meeting

The European Central bank kept its policy unchanged on Thursday.   As expected the ECB kept its key interest rate in the negative and continued to pledge to hold rates steady well after bond buys end, and promised to continue with the asset purchases until a sustained rebound in inflation occurs. Mario Draghi expressed that the euro area recovery will revive inflation pushing the euro to the highest in more than three years.   With regards to the exchange rate Mario Draghi said, “against this background, recent volatility in the exchange rate represents a source of uncertainty which requires monitoring with regard to its possible implications for the medium term outlook of price stability.”   The euro jumped as much as 1 percent to the strongest level since late 2014 and was up at $1.2490 on Thursday.  It came off that level after Draghi said he sees “very few chances” that interest rates will be raised this year.

Czech Elections

A presidential election will happen next weekend.  Czech voters are equally split between an academic who promises better relationship with the European Union Jiri Drahos and Milos Zeman who has used his time in office to push closer ties with Russia and China.  Mr Zeman who is 73 has courted the far right in rejecting migrants from Muslim countries while pursuing warmer relations with Russia and China and sniping at the press.  Mr Zeman won the first election round with 38.6 per cent of the vote.  Mr Drahos, who is 68, finished second on 26.6 percent with support from liberal voters attracted by his policies favouring European Union Integration.  Czech presidents have limited executive power in the country of 10.6 million.  They appoint prime ministers and central bankers and represent the country abroad and can have a big influence in public opinion.  The election can impact who leads the next government.  Andrej Babis, the Prime Minister is rushing to form a new Cabinet before a new presidential term starts on March 8.

Eight Jurisdictions Removed From The Blacklist Of Tax Havens By The EU

On Tuesday European finance ministers agreed to remove eight jurisdictions including Panama from its black list of tax havens, a month after a list was set up.  Barbados, Grenada, South Korea, Macao, Mongolia, Tunisia and the United Arab Emirates as well as Panama were the jurisdictions delisted after “following commitments made at a high political level to remedy EU concerns” according to the ministers.  The move is in line with the recommendations by EU tax experts in the Code of Conduct Group.  The move drew strong criticism. Meanwhile, nine jurisdictions remained on the blacklist  and are American Samoa, Bahrain, Guam, the Marshall Islands, Namibia, Palau, Saint Lucia, Samoa and Trinidad and Tobago.

The British Pound

The British pound did an eye catching move as it topped $1.40 for the first time since voters chose to leave the European Union in 2016. The British pound is benefitting from upbeat domestic data and on hopes of a favourable post-Brexit deal with the EU.   On a year to date basis it is up 3.5 percent, making it the best performing major currency even beating the high flying Euro.

UK Labour Market

The number of people working rose by 102,000 to a record high and basic pay growth increased 2.4 percent, the highest in almost a year, although still lags behind the rate of inflation. According to the Office for National Statistics unemployment fell by 3,000 during the period leaving the jobless rate at a 42 year low of 4.3 percent.  Inflation is currently running at 3 percent.   The Bank of England’s next policy decision will take place on 8 February.

US Government Shutdown

For the first time since October 2013 the world’s most powerful government shut down on Friday after President Donald Trump and the US Congress failed to reach a deal on funding for federal agencies.  Democrats had insisted that any Bill to renew government funding should also contain permanent protections for approximately 700,000 young, undocumented immigrants who were brought illegally to the US as children, known as “Dreamers”.  The shutdown was cemented when the Senate, at a late meeting held Friday night, blocked a Bill to maintain the federal government’s funding through February 16.  The vote was 50-49, well short of the 60 needed in the 100-member chamber. Tens of thousands of federal workers on Monday began closing down operations, but essential security and defence operations continued.  Then, after three days of stand-off between Democrats and President Donald Trump’s Republicans over immigration and border security, US senators voted to move forward on legislation that would reopen the federal government until February 8.

US – Imposed Tariffs

In his efforts to help domestic producers, President Donald Trump imposed a 30 percent tariff on imported solar panels and duties of up to 50 percent on washing machines in response to two US International Trade Commission rulings on unfair practices.   Trump approved a 30 percent tariff on solar cell and module imports, dropping to 15 per cent within four years.  Up to 2.5 gigawatts of unassembled solar cells can be imported tariff-free in each year.   The move is intended to help domestic producers who have struggled in the face of cheap imports.  However, some in the sector said it would slow US investment in solar power and cost thousands of US jobs.  The US has the world’s fourth largest solar capacity after China, Japan and Germany.  According to the US-based Solar Energy Industries Association the decision could cause the loss of around 23,000 US jobs this year and result in the delay or cancellation of billions of dollars in solar investments.  On the otherhand the US government argued that its domestic manufactures could not compete with what it said were artificially lower priced Asian panels.

Bank of Japan

The Bank of Japan (BOJ) kept its massive stimulus on track and left the economic forecasts and inflation unchanged.   Governor Haruhiko Kuroda said that the BOJ was not in a position to even consider exiting its current policy.  The BOJ’s board voted 8-1 to keep its interest rates and asset purchases at current levels.  The central bank forecast is that the economy will grow by 1.4 percent in the fiscal year starting in April, with inflation of 1.4 percent over the same period. The Governor further said that the Bank of Japan is watching the currency markets closely.  The yen has strengthened after the BOJ cut its bond purchases earlier this month.

Oil

Russia is prepared to continue operating with OPEC and have reaffirmed their intention to maintain oil production cuts for the rest of the year, and giving signals of cooperation in 2019.  According to Russian Energy Minister Alexander Novak the global oil market is not as yet fully rebalanced.  Furthermore Saudi Energy Minister Khalid Al-Falih said that producers should keep limits on output through 2018 as the market may re-balance at the end of the year or in 2019.  While benchmark Brent crude has gained 2.9 percent this month, US oil output is set for a strong growth this year as prices rally, according to the International Energy Agency.

DAVOS

The annual World Economic Forum kicked off this week and is being held in Davos Switzerland. Billionaires, world leaders and investors meet to discuss a range of topics amongst them the global economy and sexual harassment, and the risks and opportunities of artificial intelligence.

Gold Advanced To A Four Year High As The Dollar Declines

On Thursday Gold rose to as much as $1,366.15 an ounce which is the best mark since August 2016.  It has also climbed 10 percent since mid-December as the dollar declines amid expectations that other central banks, notably the European Central Bank and the Bank of Japan are moving closer to cut the monetary stimulus.

‘Disclaimer: The information provided on this website is being provided solely for educational and informational purposes and should not be construed as investment advice, advice concerning investments or investment decisions, or tax or legal advice. Similarly, any views or options expressed on this website are not intended and should not be construed as being investment, tax or legal advice or recommendations. Investment advice should always be based on the circumstances of the person to whom it is directed, which circumstances have not been taken into consideration by the persons expressing the views or opinions appearing on this website. Timberland Finance has not verified and consequently neither warrants the accuracy nor the veracity of any information, views or opinions appearing on this website. You should always take professional investment advice in connection with, or independently research and verify, any information that you find or views or opinions which you read on our website and wish to rely upon, whether for the purpose of making an investment decision or otherwise. Timberland Finance does not accept liability for losses suffered by persons as a result of information, views of opinions appearing on this website. This website is owned and operated by Timberland Invest Ltd.’